403(b) plans help nonprofit and public employees retire smart. Learn more about how to maximize it here.
What Is a 403(b) Plan?
403(b) plans are tax-advantaged retirement accounts for employees in schools, hospitals, churches, and nonprofits. Contributions grow tax-deferred, and distributions are taxed as income during retirement.
403(b) vs 401(k): Key Differences
While both offer similar tax benefits, 403(b) plans are less regulated, often lower in cost, and typically include annuity-based investment options. 401(k) plans provide broader investment choices but come with more administrative complexity.
Employer Matching Contributions
Many employers offer matching contributions, effectively giving you free money toward your retirement. Always contribute at least the amount needed to receive the full match.
403(b) Contribution Limits for 2025
- Standard limit: $23,000
- Catch-Up (Age 50+): $7,500
- MAC (15+ years of service): Additional $3,000 annually (up to $15,000 lifetime)
Roth 403(b): Tax-Free Growth
With a Roth 403(b), you pay taxes now but withdraw your savings tax-free in retirement. It's ideal if you expect higher future tax rates or want tax-free investment growth.
Rollovers and Withdrawals
When changing jobs, you can leave your 403(b) as-is, roll it into an IRA, or transfer it to another retirement plan. Withdrawals before age 59½ incur penalties unless exceptions apply.
Final Thoughts
403(b) plans are more than just a retirement account—they're a strategic wealth-building tool. Take full advantage of matching, Roth options, and catch-up contributions to grow your future.
